IRS Tax Liens
An IRS lien against your bank account or your paycheck can make it difficult to pay your bills and take care of your daily expenses. The only way to get an IRS lien removed is to work toward tax resolution, unless the lien has been placed in error.
The J Gannon Helstowski Law Firm is experienced in filing lien appeals and getting tax lien withdrawals, and we will work to get the situation resolved as quickly as possible. Here is a quick guide to some of your options for tax lien resolution, and for clearing your credit of lien reports.
If the tax lien against you has been in issued in error, it is possible to challenge the lien and have it removed. Here are some common reasons a tax lien might be removed.
- You have paid the tax debt in full
- The IRS made a mistake in filing the lien – the IRS either had no cause to file, did not allow you to dispute the tax debt amount, or did not follow the correct filing procedures
- The lien is due to an IRS error in processing your return
- The lien was filed while you were in bankruptcy
- You are eligible to request innocent spouse relief or participate in the Fresh Start Initiative
- It has been more than 10 years since the tax debt was incurred, and the statute of limitations on collecting it has run out
You may request a collection due process hearing as soon as you receive the lien notice, but you have limited time to appeal – if the lien has not gone into effect you must file an appeal by the deadline listed in the IRS lien notice. If a lien is already in effect, check the notice date. Beginning five days after the lien was filed, you have 30 days to appeal it.
Withdrawal and Release
Your lien and all evidence of it can be permanently erased through the process of lien withdrawal or lien release.
You may apply for lien withdrawal by making a formal request using IRS form 12277, and if approved, the IRS will issue you a form 10916(c) as proof the tax issue has been resolved. If you begin paying your back taxes by committing to an installment plan, or if you enroll in the Fresh Start Initiative with a direct debit agreement (taxes owed must be $25,000 or less), you will be on your way to lien withdrawal and federal tax debt resolution. Once your debt is satisfied, you can also have it removed from your credit report. Liens placed by state taxing authorities are more difficult to remove, and may remain on your credit report even after the tax in question is paid.
If you make an offer-in-compromise to satisfy your tax debt—meaning the IRS allows you to settle the debt for a lower amount than what you actually owe—a lien release is issued rather than a lien withdrawal. Enrolling in the Fresh Start Initiative or committing to an installment agreement can also get your lien released, usually in 30 days. This type of tax settlement differs from lean withdrawal in one key way: evidence of the lien is allowed to remain on your credit report for as long as a decade. Once you receive a lien release however, you can update your credit report on the change in status.
If you have creditors other than the IRS, subordination is the process by which one or more of those creditors may makes a claim to seize your assets instead of or before IRS does. In other words, a creditor can make an argument that satisfying the debt you owe them should happen first, and the IRS may actually allow it.
This most frequently happens when the IRS places a lien against property that has significant and clearly-defined value, such as your home or a specific business asset. If the IRS finds that it may be easier and quicker to collect from you once the creditor has sold the asset, the agency may subordinate it’s interest in order to facilitate that process.
Property Taxes and Liens
Home values are rising rapidly in most of the country, and many homeowners are finding their property tax burden increasing at an alarming rate.
If your property taxes are bundled with your mortgage payment, make sure you get proof from your lender that your annual tax payment has been made on time and in full. If you own your home outright and must make that annual payment yourself, don’t put off doing so. Failure to pay property taxes can result in a tax lien against your home, and the longer they go unpaid the more likely that you could lose your home.
If you receive a notice from the IRS regarding unpaid property taxes, respond to it immediately. Work with the IRS to set up an installment agreement if needed and keep paying your monthly amount due on time. Do this even if you disagree with your home’s current valuation and intend to dispute it with your city in order to reduce the amount of taxes you owe.
Homeowners that owe property taxes for multiple years should also act quickly to try and resolve the issue, as the more property tax debt you incur and the longer you wait to pay, the greater the chance the IRS will proceed from a property lien to full asset seizure, and sell the home in order to satisfy the tax debt.
Credit Reports and Tax Liens
Having a tax lien on your credit report is never a good thing. It can tarnish your otherwise-good credit and put your FICO® score in freefall, making it very difficult to establish new accounts, buy a home or a car, or make other type of purchases. Insurers, utilities and many other entities that do business with you may also adjust the rates they charge once a tax lien appears in your credit file.
It is therefore important to make sure that tax liens are removed from your credit reports once they have been withdrawn or released. Don’t assume the IRS will do it for you, or that credit reporting agencies have accurately updated your credit file to reflect the withdrawal or release. You must take action to ensure your credit reports are correct.
Order your report from the three major credit-reporting agencies once the lien is satisfied, and check each one for accuracy. If the lien still appears on one of the reports, follow that credit-reporting agency’s established procedure for disputing the information and requesting changes. If the status of the lien on the report cannot be verified as accurate, the information must be removed from your credit file.
Frequently Asked Tax Resolution Questions (FAQ’s)
When the IRS issues a tax lien, it makes a formal claim to your property but allows you to keep it while the matter is under consideration and you make payment arrangements.
A tax levy is more serious, and yes – the government can and will seize your assets to satisfy tax debt if you are not actively working with them to resolve the issue. Finding a payment agreement you can afford is much better than letting the situation go until a prized asset is seized. Once the IRS issues a tax levy against your home, business, or other assets, finding a means for settling the tax bill is essentially the only way to get your money and property released.
Depending on the size of your tax debt, the IRS can claim both current assets and those you will earn or acquire in the future.
If the IRS has already taken action against one or more of your accounts, it’s important to understand that the levies will not be removed until you begin working with the IRS to resolve your tax debt. Enrolling in an installment plan agreement or simply paying the taxes owed is the quickest way to get the levy on your account released. You may also provide proof of financial hardship if you cannot currently pay anything towards your tax debt.
Because banks are required to hold levied funds for 21 days before turning them over to the IRS, acting quickly to get some form of tax resolution plan in place will help your bank speed the process of getting your funds returned to you. Our tax experts are skilled in negotiating the kind of tax resolution plan designed to satisfy IRS requirements and put your money back where it belongs – under your control.
Setting up an installment agreement is probably the simplest way to manage your tax debt and get it paid off. The IRS offers several different types of agreements to fit taxpayer needs, and payments can run up to 10 years. Taxpayers who owe less than $25,000 may qualify for a streamlined installment agreement, in which you pay down the debt over a five-year period. If you owe less than $50,000, the Fresh Start Initiative allows you to extend payments to six years. Partial and full-payment plans are also available to taxpayers who do not qualify for other programs and are based on a financial statement and information submitted by the taxpayer.
The amount of time needed to get your tax issue resolved depends on several factors, including the amount of delinquency, penalties, and tax debt you have and whether you have defaulted on a previous installment plan agreement. However, we will begin working to remove financial restrictions imposed by the IRS immediately by dealing with the most time-consuming aspects of tax resolution on your behalf. If we are able to help you secure or reinstate an installment agreement to address your tax debt, chances are good you could see the lien or garnishment order withdrawn quickly, or removed in 30 days or less.
The IRS can legally collect any back taxes you owe from your bank accounts, assets and other parts of your estate if you die. They will generally do so before the proceeds of an estate are distributed among surviving children, but the debt cannot be passed on to your children otherwise.
For every tax debt, there is a Collection Statute Expiration Date. The CDED determines the amount of time the IRS can continue to pursue payment for taxes owed in previous years. The statute states that the IRS cannot pursue collection on a tax debt for longer than 10 years from the original tax assessment date, which corresponds with the month, year, and date the return was filed.
The IRS can change this date, but only under certain conditions. If you file an appeal or make an offer-in-compromise, the deadline may be extended.
We have been very successful in getting IRS tax penalties waived or reduced for our clients, including penalties for failure to file, late filing, and underpayment of taxes due. If this is the first time you’re filing a late return, or if you were previously in good standing and have been on time with your returns for the last three years, the IRS may offer you a penalty abatement.
You may also appeal your penalties by petitioning for abatement due to reasonable cause, meaning unforeseen circumstances significant enough they prevented you from filing or paying your taxes on time. Some examples include a medical emergency, temporary disability, extreme financial hardship, or natural disaster. Tax fraud carried out in your name by a CPA or tax preparation service may also be eligible grounds for an appeal.
Even if you don’t qualify for these specific types of waivers, our tax abatement experts will work with you to get your penalties reduced or eliminated. We want to ensure that you do not see your tax debt rise each month due to compounding interest and penalties on overdue tax payments.
If your financial situation has changed since your last tax return, or you can’t get on an installment plan because the amount the IRS requests is too high, there are a few other options. You can submit an up-to-date financial statement demonstrating any current hardship and detailing wages earned and expected from work or other income for the year ahead. If you can demonstrate that your income is insufficient for the IRS to collect all of what you owe within the time period they have to collect, you may be able to get penalties and interest reduced, or part of your tax debt canceled.
There is no set number of notices that applies to every taxpayer’s situation, but it’s never a good idea to ignore correspondence from the IRS. If you’ve received two or more notices about delinquent tax returns or seeking payment of taxes owed – or have gotten even one certified letter from the IRS about your situation – you may be closer to a tax lien, tax levy, or wage garnishment situation than you realize. Immediate action may be required to prevent bank account or asset seizure.
Absolutely. Your Social Security payments can be garnished just like your wages can. It’s even easier actually, because there’s no middleman — the government will just takes their portion right off the top before sending you what’s left in your social security check.
If you owe back taxes and do not cooperate with IRS attempts to collect, wage garnishment is an effective tool that forces you to pay up. Each time you fail to respond to a letter requesting payment, you’re taking another step towards wage garnishment. And once the IRS issues a wage garnishment order to your employer, he or she will have no choice but to comply.
Self-employed taxpayers are not immune to wage garnishment either. The IRS will simply issue the order to the businesses that pay you contract or freelance wages.
Yes, we offer a free consultation. Keep in mind a consultation is the assess your current situation and agree upon a fee arrangement. We may not be able to give you a legal opinion until more research is done given your situation. Sometimes it may be necessary to charge a research fee or analysis fee to give you a complete plan of action and legal opinion. We strive to keep this fee as reasonable as possible.
We provide the initial consultation free of charge, so we can learn about any tax issues you may have and design a tax resolution plan to meet your needs. We offer many services for a flat fee, and also give you the option of paying over time. We’ll do our best to work with you regardless of your financial situation.